The benchmark 30-share Sensex rose to a high of 17,523 before paring gains and ending up 34 points or 0.2 percent at 17,392, with 18 of its components advancing. The broader Nifty index rose by 10 points or 0.19 percent to 5,300, while the BSE mid-cap and small-cap indexes ended up around a percent each.

European shares lost ground on Wednesday after a report released by the Bank of Spain showed that bad loan ratio at Spanish banks rose to 8.16 percent of the total loans held by banks in February, marking the highest recorded since May 1994. The report accentuated concerns over the nation's fiscal outlook ahead of two-year and 10-year bond auctions on Thursday.

Growth concerns also returned to the fore after data showed that construction output in the euro area decreased for the third month in a row in February. Commodities were subdued and trading in the U.S. index futures point to a weak opening on Wall Street.

The U.S. dollar resumed its rally against the euro as French President Nicolas Sarkozy said that the euro's exchange rate against the dollar must be discussed with the European Central Bank. Sarkozy, who is seeking a second presidential term, told the local television channel BFM TV that euro is too expensive and a stronger euro hurts exporters as they would be less competitive. "These are debates that we must have with the ECB Governor," he reportedly said.